Soft US growth and low commodity prices are clouding the outlook for the Australian economy, new figures show.
The Westpac/Melbourne Institute Leading Index fell to -1.24 per cent in January, after dropping to -1.0 per cent in December.
It's the third consecutive fall in the index which indicates the likely pace of economic activity three to nine months into the future.
Westpac chief economist Bill Evans called the move disappointing.
"The index has now been growing below trend for the last nine months. It continues to signal that growth in the Australian economy in the first half of 2016 will be below trend," he said in a note.
"Today's print represents the largest negative deviation we have seen since the second half of 2011."
Mr Evans said the January figures were heavily influenced by international factors like soft US industrial production and commodity price falls.
He said the overseas components were partially offset by favourable domestic figures like consumer sentiment and unemployment expectations.
Mr Evans also noted that the ASX had been a persistent drag on the index's growth rate.
He said the components moving the index were key issues for the Reserve Bank of Australia when considering interest rates changes.
"International factors are pointing to downward pressure on rates whereas domestic factors, partly due to the boost to the economy from the low Australian dollar and low interest rates, are sending positive signals," Mr Evans said.
"That interaction over the course of 2016 will determine whether markets are correct."
Westpac tipped growth to be 2.8 per cent in 2015/16, compared to the government's forecast of 2.5 per cent.
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